The Request for Proposal (RFP) has always been considered to be a fair and efficient method to follow when selecting and contracting with a supplier. RFPs are widely used in industries such as manufacturing, mining and fast-moving consumer goods as the most cost-effective and sustainable sourcing solution. At their best, RFPs are still the method of choice when procuring an important or critical product or service as they are deemed to be transparent, objective and minimise risk.
However, the misuse of the RFP process by some dubious companies has given rise to much criticism. When RFPs are used just to go through the motions to comply with corporate governance requirements or to ratify a decision already made, marketers become irritated and share their experiences widely, leading to bidders not wanting to trust the process.
Why are we questioning the use of RFPs?
- The process used is cumbersome
Many companies are still stuck in the 20th century using paper-based RFPs. Although many businesses processes have been computerised and moved to the cloud, plenty of RFPs are still largely manual. Companies are still requesting multiple attachments and appendices assembled in binders. All of this manual work slows down the overall process. Progressive companies are beginning to use cloud-based procurement service providers to help automate large parts of their RFP process.
- Changing market requirements
In some industries, the traditional RFP is no longer considered the best way to select a supplier. Where the solution sought is not an existing product or a clearly defined service, the RFP may not be too restrictive. Some of the industries that are struggling with traditional RFPs are media buying, software solutions and I.T. consulting, travel services and customised freight. This is because innovative solutions and their pricing models are not able to be pre-defined without discussion. Some industries have a complex approach to pricing including volume discounts, rebates and variable pricing which may not be catered for in a traditional RFP.
- Complaints from bidders
We can learn from the frustrations encountered by suppliers responding to RFPs. Bidders claim that many RFPs no longer fulfil their intended goal and that often the best supplier does not respond for reasons such as:
- The requirements are unclear or badly defined
- The time allocated for submission is too short
- Preparing a submission is resource heavy and expensive
- The selection criteria or evaluation process seems flawed
- There is little expectation of success
Many potential bidders take the view that they will submit only if there is a more than a 50% – 80% chance of success.
- The speed of change
Being tied into a lengthy contract (more than 3 years) doesn’t make sense in today’s dynamic marketplace where economic and political conditions are changing daily. Mergers and acquisitions are disruptive and impact on both the buyer and seller sides. Organisations are expanding into new markets or changing their business operations in an existing market. Traditional RFPs are not responding well to these challenges and often do not consider alternative scenarios in their stated requirements. The best RFPs include open-ended questions that allow for unstructured responses and alternative solutions.
Where are we headed with RFPs?
Using digital opportunities
One of the main complaints about the RFP process is the time it takes. The current RFP cycle is changing substantially through the application of cloud-based software solutions. These can be used in-house or by using an outsource service provider that specialises in RFP and sourcing management. Libraries are developed to store historical spend data, market data and supplier performance information to use as a base and reference. They can also hold templates and standard text to be used in RFP preparation. Procurement professionals can and should leverage the wealth of data that is available in order to improve the speed and success of any RFP process.
The Request for Information (RFI)
A great tool that can streamline the sourcing process is to use a Request for Information (RFI) prior to issuing an RFP. It is an enquiry document, issues electronically requiring little or no added documentation, requesting general information and answers to a few direct questions about capability and capacity from a wide range of potential suppliers. The RFI leads to a reduced list of suppliers that will receive a refined and targeted RFP.
An industry-specific issue
In some industries, the RFP is seen as a barrier to achieving a working partnership. The media industry is very different from 20 years ago; digital channels have mostly replaced print media. This is having a major effect on those working in marketing procurement which was always regarded as a challenging category. Most media commentators propose a more direct face-to-face exchange of ideas and solutions where they are invited to “pitch” their solution. According to Mollie Kehoe Co, co-founder of BrandVerge, “ the days of the traditional RFP are numbered. Fostering that direct connection between media buyers and sellers will save months of research and planning, enabling a creative collaboration that focuses only on delivering premium breakthrough campaigns.”
Despite all the gloom and doom around the future use of RFPs, they remain at the centre of most corporate and government procurement. There is no doubt that procurement teams have to adapt their practices and make better use of the new tools that both give bidders confidence in the process and speed it up.